Commodity Corner: Morning Comments

Good morning,


DXU9  95.945  +0.279                       GCQ9  1396.7  -17.0                                                                 ESU9  2979.25  +35.00                     CLQ9  60.13  +1.66


Full steam ahead for risk this morning, as the trade talks at the G-20 bring optimism for a deal between the US and China back into the picture.  Both sides agreed to keep the talks going, and suspend further tariffs for the time being.  Not necessarily a surprising outcome, but there were no disasters either, and the equity markets and dollar have a huge relief rally taking place.  The oil market has its own euphoria going on today, with WTI crude (CLQ9) trades above $60, as OPEC+ announces it will keep the production quotas in place into 2020.   All of the “risk on” flows today have seen traders fly out of gold, with the lead contract (GCQ9) down around $20 today. 


If you are involved in the markets, you are aware of everything President Trump did/accomplished over the weekend, so I will move past that here.  Even with it being a holiday week in the US, it is a very big week, in terms of economic data with manufacturing data early in the week and employment data at the end of the week.  While most market participants expect the Fed to cut 25 bps at the meeting at the end of the month, the data will be scrutinized looking for clues to the contrary.    


Oil has had an interesting trade, from a late move lower in the afternoon on Friday, driven by a report out of Europe saying the first transactions have been processed on Instex, which is a financial mechanism designed to allow trade with Iran despite US sanctions.  Then, over the weekend, Russia and the rest of the OPEC cartel agreeing to keep production quotas in place for the next 6 to 9 months, well into 2020.  Oil prices shot higher on the open last night, and some traders that bought in to the hype on the sell off late Friday found themselves trapped below.  The “risk on” sentiment should keep a bid to oil prices today. 


Gold, which had been leaking lower throughout last week, as the market came to terms with the notion of the Fed only cutting 25 basis points in July, imploded further as the positive vibes generated from the G-20, along with the OPEC+ decision, tarnished gold’s allure.  Gold is still over $100 higher than levels it had seen as recently as late May, so this correction, while decent sized, isn’t that surprising.  Gold continues to have a lot of room to the downside to move to, before any serious support levels are approached. 


The grain markets had their own share of excitement on Friday, being stunned by what was shown on the planting intentions report from the USDA.  It was expected to be a cloudy number, but the report that farmers intended to plant over 91 m acres of corn, contrary to what data throughout the month of June suggested was even going to be possible, stunned the market.  Corn moved limit down after the release.  Equally as surprising was the soybean planting intentions number of only 80 m.  It was widely thought the beans, with the later planting window would reap extra acres from the inability to get the corn into the ground.  Beans shot higher on the news.  About an hour after the release of the data, the USDA announced it would re-survey numerous growing areas, as most in the market were beyond simply challenging the released data.  Corn recovered somewhat, and beans slipped a bit lower.  The grain markets will continue to deliberate on the amount of acres that actually were planted, and focus on the coming weather conditions the crops will have  to develop.  So, any hopes of some clarity coming from the data on Friday found itself with more doubt than even what was expected from stale data. 


Trade optimism also has flowed into the commodities markets today, in spite of the improved dollar, with all the markets firm today.  Copper is also benefiting as well, with better hopes for global economic growth.  The “risk on” sentiment should continue to support these gains, but at some point, the renewed dollar strength could cap momentum to the upside. 


As mentioned, even though this is a holiday week, the markets are starting out with many hot irons, and there are probably  a few more irons to pull out of the cask as the week progresses.  It may not be a very relaxing week for many.  Unfortunately, the unpredictable weather, that has had a big impact on numerous commodity markets this spring, may also impact numerous fireworks shows Wednesday and Thursday night.  I guess that seems appropriate this year.              


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      888.00                   913.75                   924.50  

CZ9                      417.25                   406.00                   402.75

WU9                    489.75                   487.25                   517.25

KWU9                  447.75                   458.25                   504.25

MWU9                546.75                   555.00                   577.50

SMZ9                   315.6                     317.4                     319.0

BOZ9                   28.34                     29.49                     29.73

CLQ9                    59.15                     59.41                     59.50                   

GCQ9                   1319.2                   1318.1                   1291.4

LHQ9                   88.590                   88.440                   84.865

LCQ9                    107.715                 112.135                 112.765

KCU9                    98.10                     100.25                   108.75

CCU9                   2404                       2352                       2315

CTZ9                    69.18                     71.93                     74.00

SBV9                    12.52                     12.84                     12.99

JOU9                    104.40                   113.45                   126.10

HGU9                  274.15                   282.50                   279.50


Have a good day,





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC